Concall highlights of Novelis, Vedanta, JSW Steel, Supreme Ind, Asian Paints, Shree Cement and Sagar Cement

·         Q3FY18: Consolidated EBITDA increased by 13% YoY to Rs67.8bn which was ahead of our estimates at Rs66.0bn on back of better than expected performance in power and iron ore partly offset by weaker performance in copper

·          Near Term Expansion Priority: 1.2mn tons Zn-Pb, 750 tons of Silver at HZ. Gamsberg output of 400KT, Oil & Gas production of 275-300Kboepd, Aluminum output of 2.3mn tons, Copper Smelter expansion to 800KT, Iron Ore ramp up to 20.5mn tons

·          Medium Term Expansion: 1.5mn tons Zn-Pb and 1000 tons silver at HZ. Gamsberg phase 2 & 3 (350KT incremental), Swartberg 75KT, Oil & Gas 300-500Kboepd, Lanjigarh Refinery 6MT, Jharkhand IO 10mn tons

·         Zinc International: Gamsberg on target for first production by mid CY18 and full ramp up in 9-12 months. CoP expected at $1000-1150/T, capex target of $400mn. FY18 production of 250KT. Q4 CoP at $1700

·          Zinc India: 950KT of refined Zn-Pb, Silver 500+ tons. FY18 CoP of $950-975 per ton

·          Oil & Gas: Q4 Rajasthan production at 165Kboepd. FY18 Gross production of 185-190kboepd, FY19 220-250kboepd, FY20 275-300kboepd

·          Aluminum: 1.5-1.6mn tons production (excluding trial runs). Alumina production of 1.2-1.3mn tons in FY18. CoP estimated at $1850-1900 per ton in Q4

·          Power: TSPL quarterly availability of 97%, FY18 target of 75%

·          Coal: Low availability of linkage coal resulted in higher cost. Auction + Linkage share dropped from 55% in Q1FY18 to 37% in Q3FY18. Expect improvement in availability in Q4FY18

·          Iron Ore: Granted additional allocation of 3.0mnt tons in Goa. 2mn tons production expected in Q4FY18. Increase in allocation in progress in Karnataka. Current discount of 20% for Goa ore (adjusted for 58%)

·          Copper: TC/RC has declined to 20.8c/lb. CY18 TC/RC at 11% lower than that of CY17 at USc 21.3/lb. 400KT expansion - EPC awarded, completion by Q3 FY20

·          Net Debt: Q3FY18 net debt at Rs162.95bn versus at Rs155.92bn in Q2FY18

·          Demand: Indian demand growth aided by government based spends. Global demand is improving for Steel

·          FY18: Total sales target of 15.5mn tons

·          NCLT: JSTL interest in Monnet Ispat, Bhushan Steel, but not interested in Essar Steel, Electrosteel

·          Imports: Coated product imports increased by 107% and colour coated product imports increased by 250%. JSTL has highlighted this trend to government. Government has introduced BIS for colour coated

·          JSTL Exports: 30% share of total sales in Q3FY18 versus 21% in Q3FY17

·          NSR: Increase of 14% YoY and 5% QoQ in Q3FY18 or by Rs1500 per ton QoQ. 5-6% increase in Jan'18

·          JSW Coated: Tarapur Galvanizing capacity increased by 75KT on back of de-bottlenecking

·          Captive Iron Ore: 0.71mn tons of captive source after two mines become operational by 31st March 2018

·          Karnataka: 35mn tons of Category A & B approval from Supreme Court. In addition category C mines production in next year.

·          Odisha: 20mn tons of capacity has been shut. Actual impact only 5-6mn tons of production. Expect supply to normalize in current quarter

·          Coking Coal: $6 per ton increase during the quarter. In Q3FY18 coking coal consumption cost of $187. Expect $10-15 per ton higher in Q4FY18.

·          VAT Refund: No clarity from the government as of now. JSTL is using 5% (pre-GST levels)

·          Net Debt: Rs420.68bn as of Dec'17 versus Rs427.64bn in Sep'17

·          Capex: Rs46.52bn spent in 9MFY18 (Rs60bn in FY18, reduced from Rs80bn). Full three year expenditure guidance unchanged

·          Revenue acceptance of 1249mn, and capital acceptance of 194mn

·          Demand: Volume growth of 19.2% YoY and value growth of 14.7% YoY in Q3FY18. Housing sector demand has improved

·          Industry Growth: 3.3% decline in PVC and 13.3% growth in CPVC volumes in 9M FY18

·          Packaging: Lower growth (3.1%) was on back of capacity constraints (in protective packaging)

·          FY18: SI maintains full year volume growth target of 12%

·          Supreme Petrochem: Fall in volumes by 13.5% last quarter due to price cut by competitor. Q4FY18 performance is strong

·          VAP: share of value added products stood at 40% in Q3FY18 versus 43% in Q3FY17

·          Joint Venture: JV with Kumi Kasei (Kumi) for manufacture and sale of injection moulded plastic components for automotive application. SI's share of 24%

·          CPVC: Received approval for fire sprinklers. Management expects good demand from next quarter. SI's CPVC volume growth was above industry

·          DWC: Pipe demand has not picked up yet. SI expects DWC demand to pick up in next year

·          Dealer: Liquidity remains tight at dealer level, SI expects decline in creditor days in Q4FY18

·          Capex: SI plans to invest Rs4.25-4.50bn (from Rs3.5bn planned in beginning of the year) in FY18

·         Capacity: Current capacity of 544KT will increase to 600KT by end of the year. Industrial Segment - 61KT, Consumer Product - 27.5KT, Plastic Piping - 387KT, Packaging - 63KT

·         Demand: Recovery for paint industry remained a little subdued. Decorative paint business in India reported single digit volume growth. Demand has not reached pre-GST level

·         Region: Demand in south was weak in Q3 (recovery started in Dec). North and East demand was good during the quarter

·         PAT: Consolidated PAT (from continuing operations) increased by 19.6% YoY, standalone net profit increased by 24.2% YoY

·         Price: No price increase during the quarter

·         Raw Material: Prices continue to move up, APNT is monitoring the trend and evaluating hikes

·         Other Expenses: Cost reduction initiatives under taken to reduce other expenses (including investment in renewables, low marketing spends)

·         International Market: Indonesia - improvement in sales during the quarter. International operations performance impacted by adverse currency impact Ethiopia and Egypt

·         Capex: Total Capex plan of Rs12bn in FY18

·         New Plants: First phase of two new plants in next financial year

·         Home Improvement: No plans to add any new category in home improvement in near term. Positive about scaling up the existing product portfolio

·         Dealer Addition: APNT adds around 3000 dealers per year. Current dealer addition run rate at similar levels

·         Investment Rationale:  Generate higher return on accrued cash and cultural fit. The plant is fully depreciated

·         India versus overseas: India remains Preferred market for SRCM. Domestic expansions remain on track

·         GCC Cement Market:  GCC is a 8 Player market. Cement industry has grown at 2% in last 5 years

·         UCC is biggest in UAE and 2nd largest in GCC (10% in GCC, 18% UAE)

·         Current Utilization: Clinker - 100% utilization, cement - 65%, 1.9mn tons of cement production in 9M (Sep'17)

·         Clinker exports to India: SRCM doesn't plan to import clinker or cement from UAE to India. SRCM plans to sell UCC's cement in nearby geographies

·         Price Control: There are no price controls in this market. Price control is in Saudi Arabia (at higher price, due to inefficient plants)

·         Limestone: currently UCC only has grey cement grade limestone. Limestone supply is not a constraint

·         Limestone Price: UCC's Limestone purchase price UAD14.8 per ton. This will reduce to UAD14.5 per ton

·         Cost Savings: SRCM plans to reduce operating cost, increase production

·         Pet coke: UCC can't use pet coke due to higher grade of limestone

·         Demand: AP & Telangana FY18E at 15% YoY (9M FY18 13%), Karnataka FY18E at 5% (9M FY18 3%), Tamil Nadu FY18E at -10% (9M FY18 -15%), Kerala FY18E at -10% (9M FY18 -2%), Maharashtra FY18E at 10% (9M FY18 8%)

·         FY19E: Tamil Nadu & Kerala 0-5%, AP & Telangana 15% (excluding Amaravati based demand), Maharashtra 10%, Karnataka 0-5%, East >10%

·         Contracted Capacity: 11,000 tons in Q3FY18 and 47,000 tons in 9MFY18

·         Price: During the quarter price lower in Maharashtra due to increased competition. Expect price to improve in the current quarter. January higher by Rs150 per ton than quarter average

·         Sand: No issues in AP & Telangana, Karnataka government has launched branded sand. Tamil Nadu government may also follow Karnataka

·         Fuel Cost: Increased by 6% due to increase in cost of imported coal. Expect BMM fuel cost to reduce to Rs900 per ton (from Rs1040 per ton in Q3FY18)

·         Fuel Comparison: Singareni Coal at Rs1.2/Kcal, Imported coal at Rs1.35/Kcal, Pet Coke at Rs1.05/Kcal

·         Pet Coke: Average price of Rs7900 per ton (landed) in Q3FY18 versus Rs6000 per ton in Q3FY17

·         Freight: Declined on back of low lead distance (360kms) from Rs823 per ton in Q3FY17 to Rs778 per ton in Q3FY18

·         New Facility: 1.2mn tons Grinding unit expected by September 2018, 18MW Captive Power Plant by March 2019

·         Industry Capacity: KCP and Shree Cement, NCL Capacity ramp up in next year

·         WHR: Total savings of Rs40mn from WHR. Expect more savings from 6MW of WHR

·         Debt: Total Consolidated debt of Rs5.1bn and cash of Rs0.8bn

·         Capex: FY18 target of Rs1.75bn (9M Rs1.2bn), FY19E 1.30bn

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